The Mosaic’s Phosphate Application Forecasts and Sulfur Supply Visibility Clash in Q2 Earnings Call

Date of Call: Aug 5, 2026

Guidance:

• Realized sulfur costs for Q3 expected to be $700-$710 per ton and ammonia costs $610-$620 per ton.
• DAP FOB pricing guidance for Q3 is $820-$840 per ton, yielding an implied realized shipping margin above historical averages.
• MOP costs expected to revert lower in the second half of the year.
• SG&A expected to decline further in the second half as cost savings are realized.
• Free cash flow expected to improve sequentially in Q3 and Q4.
• Capital expenditures lowered to $1.2 billion for the year from $1.25 billion.
• Working capital liberation of $300-$500 million expected for the year, with a third in Q3 and two-thirds in Q4.
• Phosphate prices expected to remain at current levels; potash market expected to remain constructive through the year.

Business Commentary:

Production and Market Conditions:

• Mosaic Company produced and sold 1.4 million tons of phosphate in Q2 despite market turmoil.
• Production was affected by curtailed volumes due to high sulfur costs, with significant reductions in U.S. and Brazil operations.
• The company is managing production to preserve margins and avoid high-cost inventory.

Financial Performance and Cost Management:

• Sulfur costs were locked in at $705 per ton for Q3, while ammonia costs were guided at $610 to $620 per ton.
• SG&A costs were reduced by 20% year-over-year, driven by spending discipline and divestitures.
• The company expects sequential improvements in free cash flow in Q3 and Q4 due to cost reductions and working capital release.

Sulfur and Phosphate Market Dynamics:

• Sulfur prices remain elevated due to geopolitical issues, impacting phosphate production economics.
• Phosphate prices are expected to remain stable due to supply constraints and reduced Chinese exports.
• The company is negotiating sulfur supply contracts to secure prices below spot market levels.

Regional Impact and Demand Outlook:

• North American phosphate application is forecast to be down by over 30%, and Brazil's phosphate application is expected to decline by 30%.
• Reduced application rates are due to affordability issues and availability constraints.
• Improved crop prices are expected to boost farmer demand, potentially increasing phosphate application rates.

Capital Allocation and Strategic Reallocation:

• Mosaic is divesting non-core assets, such as the Carlsbad sale and advancing the Ayrshire complex divestiture.
• The company is reallocating capital to growth opportunities like the Rainbow Rare Earth Elements project and Mosaic Biosciences.
• Strategic divestitures and investments aim to optimize the portfolio and support future growth.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges a 'difficult market' and 'unsustainable' conditions but emphasizes effective cost management, strong balance sheet, and positioning for recovery. They note 'real savings' and actions to 'preserve our ability to benefit from improving markets' while expecting ongoing curtailments and elevated idle expenses.

Q&A:

• Question from Duffy Fisher (Goldman Sachs): Concerns about phosphate application rates in North America and Latin America relative to normal.
  Response: North America phosphate application down ~15% last year, expected down ~30% this year; Brazil application down ~30%, impacting yields and leading to significant nutrient removal.

• Question from Joel Jackson (BMO): Clarification on Q3 phosphate guidance, specifically ammonia costs and implications for earnings.
  Response: Ammonia costs slightly higher due to contract flow-through; Q3 stripping margins expected down but still above historical levels, with volume sales guidance at 1.1-1.4 million tons.

• Question from Vincent Andrews (Morgan Stanley): Update on expected working capital outflow for the year.
  Response: $300-$500 million working capital liberation still expected, with dynamics shifted due to lower prepayments in Brazil but stronger collections anticipated in Q4.

• Question from Chris Parkinson (Wolf Research): Operating rates of facilities and implications for normalized production.
  Response: Operating rates around mid-70s at New Wales and Riverview, constrained by sulfur supply and optimized based on product demand; Louisiana offline due to sulfur costs.

• Question from Jeff Zikosis (JP Morgan): Cash flow shortfall and strategy for Faustina ammonia plant.
  Response: Cash flow shortfall ~$500 million for the year, managed via stable debt; Faustina ammonia used internally in Florida network, excess sold if needed; no plans to close it.

• Question from Ben Thuror (Barclays): Drivers of lower profitability in Q3 and outlook for Q4 in South America.
  Response: Q3 profitability down due to lower production volumes (sulfur constraints) and higher idle/turnaround costs; Q4 to see contribution from biosciences and distribution but challenging.

• Question from Matt Dio (Bank of America): Idle turnaround costs for Q3 and reason for flat potash realizations.
  Response: Idle costs ~$100-$120 million in Q3 (double Q2 idle); flat potash realizations due to higher freight rates impacting export netbacks and channel mix shift to Campotex.

• Question from Adelaine Rodriguez (Mizuho): Outlook for phosphate affordability and how it may resolve.
  Response: Affordability issue likely to resolve via rising crop prices (tailwinds for demand) and potential new economic equilibrium, with significant phosphate production shortfall expected.

• Question from Kristen Owen (Oppenheimer): Details on write-down and inventory levels.
  Response: Write-down on a prior capital project (battery cathode material); inventory levels (125 days) elevated due to prices, with physical inventories trending down as production curtailed.

• Question from Lucas Beaumont (UBS): Phosphate production footprint outlook for Q4 under current conditions.
  Response: Production expected to remain stable, constrained by advantaged sulfur supply and active global markets, with potential minor fluctuations.

• Question from Andrew Wong (RBC): Ramp-up speed post-normalization and sulfur contract negotiations.
  Response: Ramp-up to normal rates could occur in weeks, not months, if sulfur returns; strong relationships with Gulf Coast refiners enabled favorable Q3 contract, expecting similar future deals.

• Question from David Simmons (BNP): Inclusion of Faustina ammonia in Q3 cost guidance and potential Q4 drop.
  Response: Q3 ammonia cost guidance includes internal Faustina supply; most production is internal/contracted, so realized costs not expected to drop significantly in Q4.

Contradiction Point 1

Phosphate Application Decline and Its Impact

Contradiction in quantifying the severity of phosphate application underperformance, impacting expectations for regional agricultural productivity and company revenue.

What questions does Duffy Fisher of Goldman Sachs have for management? - Duffy Fisher (Goldman Sachs)

2026Q2: North America phosphate application is estimated to be down 20% from normal this year... Latin America... forecast to be down 30% from normal levels. - Bruce Bodine(CEO), Jenny Wong(EVP of Commercial)

What is your best estimate for how much below normal phosphate application was in North America this year, and what do you expect for Latin America relative to normal? - Christopher Parkinson (Wolfe Research)

2026Q1: ...the company is curtailing production in Q2 due to high input costs and the expectation of compressed Q3 stripping margins. - Bruce Bodine(CEO)

Contradiction Point 2

Sulfur Supply Visibility and Production Curtailment

Inconsistent portrayal of the company's ability to predict and manage sulfur supply constraints, affecting production planning and investor confidence.

Chris Parkinson (Wolf Research) - Chris Parkinson (Wolf Research)

2026Q2: The constraint is sulfur supply... When sulfur availability improves, the company expects to quickly ramp up to full production rates. - Bruce Bodine(CEO)

What are the current operating rates at the facilities, and how do you plan to normalize operations as conditions improve? - Jeffrey Zekauskas (JPMorgan)

2026Q1: ...There is currently no good visibility into the amount of sulfur pent-up behind the Strait of Hormuz. - Bruce Bodine(CEO)

Contradiction Point 3

Working Capital Liberation Forecast

Contradiction in the expected timing and magnitude of working capital release, affecting cash flow projections and financial planning.

Vincent Andrews (Morgan Stanley) - Vincent Andrews (Morgan Stanley)

2026Q2: The company still expects a working capital liberation of $300 million to $500 million for the year... $100-$200 million is expected in Q3, with the bulk—two-thirds—coming in Q4. - Bruce Bodine(CEO), Luciano Ciani-Perez(CFO)

Is the $400 million working capital outflow projection for the year still accurate? - Justin Pellegrino (Morgan Stanley)

2026Q1: The $120 million inventory release in Q1 was partially offset by seasonal builds in Brazil. The company expects further working capital release in Q2 and throughout the year. - Bruce Bodine(CEO)

Contradiction Point 4

Phosphate Production Guidance

Contradiction on the conservatism and expected trajectory of phosphate production volumes, impacting supply forecasts and strategic outlook.

Lucas Beaumont (UBS) - Lucas Beaumont (UBS)

2026Q2: Underperforming facilities are operating at low to mid-70% rates... Production is expected to remain at current levels in Q4. - Bruce Bodine(CEO)

Okay, let me try to figure this out. The user wants me to rewrite the input into a single concise earnings-call question. The input is: "If conditions remain unchanged, what production adjustments are expected for Q4?" First, I need to check the rules. The output must be exactly one line, only the final question text, end with a question mark if possible. No explanations or extra text. If the input isn't a question, is too vague, or lacks info, output it as-is.The input is already a question. It starts with "If conditions remain unchanged..." which is a conditional. The question is about production adjustments expected for Q4. The user wants it concise. Maybe "conditions remain unchanged" can be simplified? Like "assuming current conditions continue" or "if current conditions persist." But the original is already pretty concise. Wait, the original is "If conditions remain unchanged, what production adjustments are expected for Q4?" Maybe "conditions" is a bit vague, but in an earnings call context, it might refer to market, economic, or company-specific conditions. Since the input uses "conditions," maybe it's best to keep it unless there's a clearer term. Is there a way to make it more concise without losing meaning? Let's see. "What production adjustments are expected for Q4 if conditions remain unchanged?" That's the same as the original but starts with "What." The original starts with "If," which is fine. Alternatively, "What production adjustments are anticipated for Q4 under unchanged conditions?" But "under unchanged conditions" might be less common phrasing. The original is straightforward. I think the original is already a clear, concise question. The user might not need any changes. According to the rules, if it's already a clear question, we can output it as-is. But wait, the instruction says to rewrite into one concise question. The input is already a question. But maybe the user wants it rephrased for conciseness. Let me check again.Original: "If conditions remain unchanged, what production adjustments are expected for Q4?" It's a valid question. The output rules say if the input is already a clear question, output as-is. But the user says "rewrite the input into ONE concise earnings-call question." So maybe they want a slight rephrasing for conciseness. Let me see. Alternative: "What production adjustments are expected for Q4 if conditions remain unchanged?" That's the same as the original. Maybe the original is already the best version. Since the input is a clear question, perhaps the correct output is the input itself. Wait, but the user says "rewrite" which implies some change. But the rules also say if it's already a clear question, output as-is. Wait, the rules state: "If the input is NOT a question, is too vague, or lacks enough information to form a clear earnings-call question, output the input EXACTLY as-is..." So if it is a clear question, we can rewrite it. But the user's instruction says to rewrite into a concise question. So maybe even if it's a question, if it can be made more concise, we should. But how?Original: "If conditions remain unchanged, what production adjustments are expected for Q4?" Is there a way to make it more concise? Maybe "What production adjustments are expected for Q4 if conditions remain unchanged?" The structure is the same, just starting with "What." It's the same number of words. Maybe that's better. But the original is already concise. Alternatively, "What Q4 production adjustments are expected if conditions remain unchanged?" That's shorter. "Q4 production adjustments" instead of "production adjustments for Q4." But "for Q4" is more precise. Maybe "Q4" as an adjective is okay. So "What Q4 production adjustments are expected if conditions remain unchanged?" That's a bit more concise. But the original uses "for Q4," which is correct. The user might prefer either. Since the original is already a valid question, and the rules allow outputting as-is if it's a clear question, but the user wants a rewrite. Hmm. Wait, the user's instruction says "rewrite the input into ONE concise earnings-call question." So even if the input is a question, they want it rewritten. So perhaps the answer is the same as the input but maybe slightly rephrased. But given the strict rules, maybe the best approach is to check if the input is a clear question. Since it is, and the user wants it rewritten into a concise one, but the input is already concise. Therefore, the output is the input as-is. But the user might want to make sure it's the most concise. Alternatively, maybe "What production adjustments are expected for Q4 if conditions remain unchanged?" is the same as the input. Let me check the input again. The input is: - Christopher Parkinson (Wolfe Research, LLC)

2025Q4: The 7+ million tonne guidance is based on trailing performance but is expected to improve. Operating factors... are approaching or have reached the target low-80% threshold, with turnarounds scheduled for the first half of the year. Uptick in production is expected in the back half, providing upside. - Bruce Bodine(CEO), Luciano Pires(CFO)

Contradiction Point 5

Timeline to Reach Normalized Phosphate Production Rates

Inconsistent guidance on the speed of production recovery, affecting expectations for operational normalization and future capacity utilization.

Chris Parkinson (Wolf Research) - Chris Parkinson (Wolf Research)

2026Q2: Underperforming facilities are operating at low to mid-70% rates... When sulfur availability improves, the company expects to quickly ramp up to full production rates. - Bruce Bodine(CEO)

What are the current operating rates at the facilities due to curtailments, and how do you plan to normalize operations as conditions improve? - Christopher Parkinson (Wolfe Research)

2025Q3: The company is committed to reaching normalized production rates... Issues from September are resolved, but progress is slower than expected due to a loss of operational 'muscle memory' from high turnover... The guidance philosophy has shifted to being forward-looking based on proven performance. - Bruce Bodine(CEO)